January 31st, 2016

“KNOW WHAT YOU OWN AND WHY YOU OWN IT” (Peter Lynch – Fidelity,  annualised 29% 1977 – 1990) 

 The month of January draws to a close and of course when we look at the raw statistics it would seem that times are pretty tough out there. Of course the
Chinese market decline (22.7% year to date) has had a lot to do with the apparent fear and talk of another 2008, but just remember the Warren 
Buffett quote, “Be fearful when others are greedy and greedy when others are fearful”

The 22.7% drop in China is obviously going to have an impact around the world but when looking at the numbers, perhaps not as significantly as you may think.
Year to date, the Dow was down 5.5%, Nasdaq 7.9%, FTSE 2.5%, Dax 8.8%. These are obviously not the kind of results you want from your hard earned cash
but  at the risk of sounding like a walking cliche (cliches do exist for a reason though….) , lets think of it at a market of stocks.

My bundle of four tech stocks which I talk about every week on my blog (Microsoft, Apple, Google, Facebook) would have only lost you 0.8% of your capital and given
two of the four pay dividends your net position would be positive.

Ok I understand that Facebook did particularly well and Apple poorly (up 7.2% and down 7.5% respectively) but having the diversification would have meant you were 
streets ahead of the market. Lets drill down a little further and see why everyone in the world should own these companies.

Facebook has 1.6 billion users now, it was only in August last year that it had its very first billion users in a day. I am sure most of us check our Facebook daily. The average
 user spends 25 minutes a day on there, that’s 40 billion minutes or 77,160 years of consumer time available to advertisers, as a business you simply cannot afford 
 not to be a part of this and the user numbers will grow not decline. Some more Facebook stats below for those who are interested


Apple is another company I buy for my clients. Yes if you had bought at the start of the year you would be down (still less than market) but for the long term it’s a buy all
day long. The company is sitting on US$217 billion cash.Its recent quarterly results showed the most profitable quarter ever had by a US company with net income of US$18.7 
Billion. In terms of the revenue which was just shy of US$76 billion, that works out at US$585k per minute….startling numbers I am sure you will agree. 

A recent report found that within the next five years , India alone will have over 500 million mobile internet users. The reach of this phenomenon is surprising, highlighted above
by our ladies from rural Ahmedabad in their beautiful celebratory outfits. Whilst of course Apple will not have all this market, its certain to capture a percentage. What’s the bet
the next thing our friend in the photo did was share it on Facebook.

Another issue the above photo highlights is people coming out of poverty and nowhere is this more prevalent than in India. I think Modi’s polices will be good for the economy 
and people, and as such a huge population ,good for the world economy. Although the “Emerging Markets” (a phrase I dislike as too generic) have struggled of late, you still
see our “poster child” stocks such as J&J, Unilever and Colgate performing well (up 2%, 1.3% and 2.7% respectively) despite their emerging market exposure (Unilever does nearly 
60% of its business there). 

The first time a person from a village in India (or in deed Africa , South America) brushes their teeth with Colgate toothpaste or washes with Dove shampoo, cleans his ear with a  
cotton bud, guess  what , he is doing it again the next day, and the next, and the next. These companies also have a terrific history of paying dividends which are so important in the current 
interest rate climate, in fact J&J has increased its dividend every year for over forty years. For those of you who are not my clients , if you don’t own these stocks you need to ask
 why (or ask your financial advisor just before you sack them and come to me )…..😉

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